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The Morning Ledger: Stevens on Short List for GM CFO Job

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: david.hall@wsj.com. Get The Morning Ledger emailed to you each weekday morning by clicking here. Follow us on Twitter @CFOJournal.

GM’s executive shake-up has left the CFO spot vacant. CFOJ’s Noelle Knox and Maxwell Murphy report that Chuck Stevens, CFO of GM’s North American division since 2010, is at the top of the shortlist to succeed finance chief Dan Ammann, who is shifting to a new post as president, overseeing its global operations. Mr. Ammann’s move comes as Mary Barra prepares to take over from Dan Akerson as CEO next month—becoming the first woman to run a major global auto maker, the WSJ reports. Mr. Stevens has had a long, international career at GM, including the CFO post in South America. And the company has recently been raising his profile. In August, he represented GM at the J.P. Morgan Automotive Conference in New York, and he fielded analysts’ questions during GM’s third-quarter earnings call.

“For an outsider to have a shot at the CFO role at GM, they would need to have a global background in a best-in-class finance organization,” said Christopher Langhoff, founder and managing partner of CCL Search, an executive-search firm that specializes in placing CFOs. “They are likely to have come up the analytical side of finance and have some solid experience with the Street both in terms of investor relations and balance-sheet management. And…they would have to be ‘big enough’ to help retain and attract the talent that the organization needs to continue their recovery.”

Whoever fills Mr. Ammann’s shoes will face some formidable challenges. The company needs to improve the operating margins on its vehicles, beef up its sales of small cars and improve the fuel efficiency of its trucks. “The most obvious challenge is pricing pressure,” said Michael Schmall, a managing partner for the research and consulting firm Planning Edge, which specializes in the automotive market. “GM needs to make more money per vehicle.” William Selesky, who follows GM for Argus Research and has met Mr. Stevens, said he would view Mr. Stevens’s appointment as company CFO as a positive. The pressure will be on, however, if he can’t quickly boost operating margins and close the gap with Ford. “They’re going to start giving him a hard time [otherwise].”

THE DAY AHEAD:

Costco is likely to report an uptick in quarterly earnings, but its pace of growth is likely to slow because of an end to a fillip from membership fees, writes Ahead of the Tape’s Spencer Jakab. Two years ago, Costco raised fees by 10% for North American customers, the first change in more than five years. Because it took a year for all members to renew at the higher rate and another for the accounting effect of each increase to appear, last quarter saw the last of that boost. The end of the fee effect comes during a quarter with same-store sales growth of only 3% year over year—decent for most retailers but low for Costco. Add back the impact of gasoline prices and foreign-exchange shifts, though, and it would have been a more-typical 5%.

Markets flash: Asia ended lower as a stronger yen weighed on shares in Japan. European shares are little changed and DJIA futures are lower.

EXCLUSIVE ON CFOJ:

SEC gets ‘serious’ on improper segment reporting. The SEC is asking more companies to make changes to their segment reporting in a push to increase transparency and accuracy in financial results, Emily Chasan reports. “We are serious about segment reporting,” said Ryan Milne, an associate chief accountant in the SEC’s Division of Corporation Finance. He was speaking at the AICPA conference in Washington, D.C. Segment reporting was the third-most-common area discussed in SEC comment letters in the first three quarters of this year, following tax- and goodwill-accounting issues. In its regular review process, the agency addressed segment-reporting issues in some 435 letters to 184 companies this year through Sept. 30.

Mid-market CFOs fear rising health-care costs. The majority of middle-market CFOs expect their health-care costs to increase next year as they comply with the Affordable Care Act, Vipal Monga reports. That could make them cut spending in other areas of their business, according to a survey by Bank of America Merrill Lynch. More than two-thirds of the CFOs listed health-care expenses as a “significant concern” for the economy, and more than half said their labor costs would rise as they complied. Three-quarters of those said they would offset those costs by dialing back spending. Despite those concerns, almost three-quarters said they were either completely or mostly ready to comply. That wouldn’t have been the case last year, said Alastair Borthwick, head of Global Commercial Banking at Bank of America Merrill Lynch. The Obama administration in July granted a one-year delay for companies with more than 50 employees. “The decision to delay by a year has helped our corporate client base,” he said.

CORPORATE NEWS:

RBS CFO jumps ship.Royal Bank of Scotland CFO Nathan Bostock is leaving the bank to join rival Santander U.K., the WSJ reports. Mr. Bostock, who has spent just 10 weeks in his role at RBS, is to become deputy CEO and chief risk officer at the British unit of Banco Santander. Mr. Bostock is expected to stay and conduct an orderly transition, RBS said, adding that details on arrangements for his successor would be announced in due course. The defection of a top executive is the latest in a long list of woes to beset the government-controlled bank. Under pressure from the government, RBS announced a review of its businesses and said last month it is creating an internal bad bank. The move, which was supposed to be partly orchestrated by Mr. Bostock, was intended to speed the lender’s return to private hands. Mr. Bostock previously spent four years running RBS’s risk and restructuring business before being promoted to finance director in October alongside the bank’s new chief executive, Ross McEwan.

Discovery mulls bid for Food Network owner.Discovery Communications is considering a bid for Scripps Network Interactive, the owner of cable channels such as the Food Network and HGTV, the WSJ reports. Such a deal would combine two cable-channel owners that between them have a market capitalization of about $43 billion. Helping fuel Discovery’s interest in Scripps now is concern about the potential impact of a possible consolidation wave among the cable and satellite operators that sell subscription television.

J.P. Morgan files patent for Bitcoin-style payment system.J.P. Morgan has filed a U.S. patent application for a computerized payment system that resembles some aspects of Bitcoin, the FT reports. The bank’s proposed system would allow people to make electronic payments over the Internet without having to reveal their name or account numbers or to pay a fee. J.P. Morgan’s proposed system involves creating “virtual cash” that would sit in an online wallet, reminiscent of the computer files that hold Bitcoins on behalf of their users. While the bank does not name Bitcoin or any other virtual currencies in its patent application, it does hint at “emerging efforts” to challenge the dominance of credit-card technology.

ECONOMY:

Budget deal struck. House and Senate negotiators hammered out a budget agreement designed to avert another government shutdown and bring some stability to Congress’s fiscal policy-making over the next two years, the WSJ reports. Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.) said it would allow more spending for domestic and defense programs in the near term, while adopting deficit-reduction measures over a decade to offset the costs. Revenue to fund the higher spending would come from changes to federal employee- and military-pension programs and higher fees for airline passengers, among other sources. An extension of long-term jobless benefits, sought by Democrats, wasn’t included.

REGULATION:

Volcker rule challenges Wall Street. All five of the necessary regulators voted to approve the Volcker rule as federal regulators moved to bar banks from making risky bets with their own money, the WSJ reports. Executives at the large banks spent yesterday poring over each passage of the final rule, hunting for details that will help them formulate their responses to the provision. Citigroup CFO John Gerspach said judging the Volcker rule’s impact will come down to the details of how banks must prove they’re in compliance, Bloomberg reports. “What’s going to be important is the details,” Mr. Gerspach said. “The details will include the documentation that institutions will have to have in order to justify or demonstrate that they are capable and should have the exemptions” outlined in the rule, he said.

SEC task force probes use of non-GAAP metrics. An SEC accounting-fraud task force is scrutinizing companies’ use of their own tailor-made performance measures, the WSJ’s Michael Rapoport reports. “We’re looking at non-GAAP measures,” said David Woodcock, chairman of the SEC’s new Financial Reporting and Audit Task Force, referring to companies’ customized measures that don’t comply with generally accepted accounting principles, or GAAP. Mr. Woodcock, who was speaking at the AICPA conference, didn’t mention any specific companies that the task force is looking at. While other regulators have touched on some of the same issues in recent months, Mr. Woodcock’s comments are the first indication that the SEC is looking at these metrics with an eye toward possible enforcement cases.

CFO MOVES:

Hyperdynamics, an oil and gas company based in Houston, promoted David Wesson to chief financial officer. He succeeds Paul Reinbolt, whose impending departure was announced in August. Mr. Wesson was most recently the company’s controller. As CFO he will receive a base salary of $240,000, a stock grant of 9,265 shares and will be eligible for performance-based bonuses. Mr. Reinbolt received compensation in fiscal 2013 valued at $557,744, according to a proxy filing.

HD Supply Holdings, an industrial distributor based in Atlanta, promoted Evan Levitt to chief financial officer. He succeeds Ron Domanico, who will remain with the company to assist with the transition until his retirement in April. Mr. Levitt was most recently the company’s controller. As CFO he will receive a base salary of $340,000, a $1 million promotional equity grant, and have a bonus target of 60% of his base. Mr. Domanico received compensation last year valued at $1.1 million, according to a regulatory filing associated with the company’s public offering this summer.

Oil States International, an oilfield-services company based in Houston, hired Lloyd A. Hajdik as its chief financial officer and treasurer. He succeeds Bradley Dodson, who will shift to the role of executive vice president of accommodations until that unit is spun off, at which time he will become president and chief executive of the new public company. Mr. Hajdik was most recently CFO of GR Energy Services. Mr. Dodson received compensation last year valued at $1.9 million, according to a proxy filing.

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